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Discussion Starter #1
Alright guys I have a question about stocks...
lets say you own shares in company A..... Company A is bought out by Company B... what happens to the shares that you had of Company A ????? do they pretty much become worthless.... are they somehow transferred over???
 

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It will transfer over.. but you might get screwed because they might say it's a 10-1 ratio or something... so for every 10 you own, they give you 1 of the new stock. Best case sencerio is that they give you 1:1 and change chaage the name of the stock to Company B's
 

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Discussion Starter #3
Interesting.... now is it normally the case that they give you the crappy ratio of 10:1 or is it more likely to be a better ratio closer to the 1:1 ??? Not too familiar with this so is there a norm for this type of transfer???
 

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Discussion Starter #4
Or is it done on an even basis... like company A was worth $1 dollar a share and Company B was worth $5 would they give you 1 share of Company B for 5 shares of Company A so that the money evens out????
 

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It all depends on the valuation of each company, the sales price agreed to, and the stock prices of the 2 companies at the time of the acquistion. You won't get screwed in any case unless the resulting company takes a dive. However the values work out at the time will determine the ratio. You will then be issued new stock certificates in the acquiring company's name according to the ratio.

The ratio isn't important because it depends on the stock price of the acquiring company. Very simple, made-up example:
Company A stock is selling for $15 per share. Company B stock is selling for $30 per share. Sales price is agreed and stock ratio becomes 2 for 1 (each 2 shares of Company A is traded for 1 share of Company B). Say you own 100 shares of Company A worth $1500. You would turn in your 100 share certificate and be issued a 50 share certificate in Company B also worth $1500 (50 X $30).

The real question is whether Company B's stock is likely to make you money in the future. Sometimes companies buy another at a discount, sometimes at a premium. It is usually the case, though, that the company doing the buying will end up in a stronger position than before. No guarantees obviously.
 

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Discussion Starter #6
Sweet.. thanks guys!!!
 
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